Theaters decrease, slight increase in screens, domestic cinemas enter the "stock optimization" stage

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Data source: Top Consulting

“After the pilot, the response has been quite good indeed. We are already studying further extending the pilot service.” Zhou Minghui, manager of Hangzhou Xitian Chengshidai United Cinemas (hereinafter “Shidai United Cinemas”), told Securities Times reporter. At the end of February this year, Shidai United Cinemas launched an innovative service: for viewers whose movie-watching experience is not good, they can apply for a refund of 40% of the ticket price within 20 minutes.

This service has generated a response that exceeded expectations. Zhou Minghui admitted that, on the one hand, the service was launched because competition in the market has intensified and cinemas hope to explore a differentiated operating route; on the other hand, they want to genuinely improve viewers’ movie-watching experience.

In recent years, domestic annual box office has fluctuated around RMB 50 billion. Meanwhile, the industry’s overall seat occupancy rate has been volatile and trending downward. Under fierce competition, some cinemas choose to exit the market; this year, the number of domestic cinemas has already declined somewhat. Many other cinemas also choose to upgrade equipment and optimize services to “keep viewers.”

The total number of cinemas decreases

After the Spring Festival holiday every year is the peak period when cinemas shut down. Since February this year, cinemas in many places have released shutdown announcements. According to data provided by Top Consulting, as of now, the number of cinemas temporarily closed this year has exceeded 300, and the latest total number of operating cinemas in China is 13,341, down 280 from 13,621 at the end of 2025.

Taking Wuhan as an example, since March this year, stores including Wuhan Laina Wanlong Cinema, the Wangjiawan branch of China Film Starmei Cinemas, and the Wuhan Huangpi branch of Huayi Brothers Cinemas have already closed. Among them, the Wuhan Huangpi branch of Huayi Brothers Cinemas has been open for 15 years; it is scheduled to close on April 6.

Domestic cinemas previously experienced several consecutive years of rapid growth. In 2018, the total number of domestic cinemas first exceeded 10k, reaching 10,517. By the end of 2019 and 2020, it increased to 11,470 and 12,000, respectively. However, in the past two years, growth in domestic cinemas has clearly slowed, and this year it has even begun to decline.

“The decline in the number of domestic cinemas in 2026 is an inevitable result of the industry shifting from incremental expansion to stock optimization.” Top Consulting CEO Cheng Fei told reporters.

Cheng Fei further analyzed that, on the one hand, the number of screens in China is still growing moderately, and among newly built cinemas, tier 3, 4, and 5 cities account for 51%, which shows that sinking markets remain a key focus for development; on the other hand, in 2025, 740 cinemas were shut down. In 2026, the number of cinemas will decline, and on top of that, leading cinema chains have paused the development of light-asset cinema franchisees, focusing on direct operation. This indicates that the industry has said goodbye to blind expansion and has entered a rational adjustment period characterized by reducing quantity and improving quality and efficiency.

Cheng Fei believes that there is a structural oversupply problem in domestic cinemas. Although the overall number of cinemas is high, their distribution is uneven. Cinemas in tier 1 and tier 2 cities are relatively dense, and in some areas there has even been excessive competition, while tier 3 and 4 cities and rural areas still have significant market gaps. This year’s change of overall quantity staying stable and structural adjustments taking place is precisely the market’s “self-correction” for supply-demand imbalances.

Tanci Fei, a film producer, director, and planner, also said in an interview with reporters: “Overall, the number of cinemas is currently quite saturated. Given the current market conditions, it may be difficult to support that many cinemas, so it’s normal for the total number of cinemas to decline—it aligns more with the laws of the industry.”

Seat occupancy rate hovering at a low level

Cinemas are a typical capital-intensive project. In the past, A-share cinema chain leader Wanda Film once disclosed an investment plan to build 162 new cinemas and 1,258 auditoriums. The construction cost for a single auditorium can be as high as RMB 2.5 million. For a cinema with 8 auditoriums, the total construction cost alone can be as high as RMB 20 million.

Operating costs for cinemas are also not low. According to industry insiders, fixed costs for cinemas include venue rent, labor costs, equipment depreciation, renovation amortization, and more—these expenses are usually hard to compress.

In contrast, cinema revenue sources are relatively single. Currently, most domestic cinema revenue mainly depends on box office revenue sharing. Under the current allocation mechanism, for a 50-yuan movie ticket, after deducting taxes and the film-side and cinema chain shares, the amount that a cinema actually receives is only about 20 yuan. When box office output is too low, cinema operating costs become difficult to cover.

The reality is that with the growth in the number of cinemas, in recent years domestic cinema seat occupancy rates have continued to fall. Data from Lighthouse Professional Edition shows that in 2019, the seat occupancy rate of China’s cinemas was 10.9%. Since 2020, seat occupancy has remained below 10%. In 2025 it was 7.1%, and since 2026 it has been only 6.6%.

On March 11 this year, the Fei Wang Cinema located in Baoshan District, Shanghai, closed and shut down. This is a cinema with 7 auditoriums and 839 seats. During the 2019 peak period, the cinema’s annual box office was above RMB 7 million and its seat occupancy rate was 14.5%. In 2025, the box office fell to RMB 3.39 million and the seat occupancy rate dropped to 5%.

“When we go to watch movies, unless it’s an important release window, it’s often just one or two people per auditorium. Spring Festival’s golden window is better, but cinemas also can’t completely rely on golden windows to ‘carry the show.’” Tan Fei said directly that the current seat occupancy rate is not sufficient to support healthy development of the industry.

Given this situation, reporters learned that some cinema chain companies have already listed controlling cinema operating costs as an important task. Especially for cinemas where rent takes a relatively large share of operating costs, some cinema chains have proposed rent-reduction targets, negotiating directly with landlords in the hope of lowering fixed costs and improving profitability for each individual store.

In its 2025 annual report, Hengdian Film said that, using regions as units, the company concentrates efforts to carry out cinema rent reduction and fare reduction work. It has adopted measures such as technology-based energy-saving retrofits, centralized procurement, and strengthening preventive maintenance for equipment, and by optimizing the organizational structure and improving the efficiency of labor cost, it has significantly lowered daily operating costs.

Do something “different”

“Movies, as a form of entertainment consumption product, still play an irreplaceable role. The market still needs movies. And regardless of whether it is providing viewers with audiovisual enjoyment or offering social entertainment venues, the role of cinemas is irreplaceable.” Tan Fei said.

Besides reducing costs, many practitioners are still working on other approaches, hoping to keep more viewers. Recently, Hangzhou Shidai United Cinemas attracted market attention for a service initiative. The cinema piloted a movie-experience guarantee service from March to April this year: within 20 minutes after the film starts, viewers who are not satisfied with their movie-watching experience can choose a 40% refund.

“Including our cinema, there are about 7 cinemas in the surrounding area. And we belong to an older cinema that has been open for a relatively long time, so the competitive pressure is indeed very high. Last year, after we invested a lot of money to upgrade our hardware and equipment, we also started to improve our services.” Zhou Minghui explained that as cinemas are terminal screening venues, they cannot control film quality, but they can start with service, do everything possible to enhance customer experience, and keep customers.

Under intense market competition, leading cinema chain companies, while cutting costs and optimizing services, have begun to increase resource investment and promote the development of diversified business formats.

In recent years, Wanda Film has focused on building a “super entertainment space.” In the past two years, the company has gradually “moved” new consumer brands such as Good Luck Coconut, 52TOYS, and Polaroid-style instant cameras into the cinema lobbies, hoping to leverage movies’ ability to shape experiential scenarios and turn cinemas into “offline hubs” connecting Generation Z interests and social interactions.

Last year, Shanghai Film launched the country’s first animation-themed cinema and also built “Yingyuan She,” aimed at providing amusement-park-style consumption scenarios. In a previous interview with reporters, relevant personnel from Shanghai Film said that these initiatives will effectively extend the time viewers spend before and after watching movies, enhance viewers’ immersive experience and sense of social belonging. This is also the company’s exploration of iterating cinemas from mere screening venues into cultural consumption destinations.

Cheng Fei believes that, facing the current situation, cinemas need to shift from competing by scale to competing by value. Feasible paths include technology upgrades and enhancing differentiated experiences, promoting the integration of multiple formats, and increasing revenue from sources other than box office.

On the technology front, he gave an example: in 2025, box office output from special-effects auditoriums in China grew year over year by 48.5%. Average revenue per show in premium auditoriums such as IMAX reached RMB 999.5 per show, far exceeding RMB 489.6 per show for regular auditoriums. For the Guiyang IMAX-GT auditorium, annual ticket sales box office reached RMB 28.53 million. This proves that high-format auditoriums are the key to breaking the deadlock.

In terms of integrated business formats, Cheng Fei suggested that cinemas no longer need to stick to the old dual structure of “lobby-auditorium.” Instead, during time slots with low box office output, cinemas can introduce a “movie+” model and hold activities such as art exhibitions, themed markets, and live broadcasts of esports events—extending viewers’ consumption behavior from 2 hours of movie viewing to 3 to 4 hours of cultural consumption.

(Source: Securities Times)

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